Financing a Second Home in the Lowcountry: What Most Buyers Miss

The Lowcountry has a way of getting under your skin. You come down for a long weekend, play a round at Harbour Town, watch the sunset over the May River, and suddenly you're scrolling Zillow from the airport.

Buying a second home here is one of the best decisions you can make — but financing has some real curveballs that catch even experienced buyers off guard. Here's what you need to know.

The Down Payment Isn't Always 20%

Most buyers assume they need 20% down on a second home. That's not always true. Conventional loans allow as little as 10% down for a second home purchase, which can make a meaningful difference on a $500,000 property — we're talking $50,000 vs. $100,000 out of pocket at closing.

The catch? You'll pay private mortgage insurance (PMI) with less than 20% down, and second home loan pricing carries slightly higher rates than a primary residence. But when you run the actual numbers, many buyers find that keeping that extra $50,000 invested or liquid gives them more financial flexibility than tying it all up in the down payment. It's a conversation worth having, and the math might surprise you.

Condo Warrantability Can Kill a Deal

This is the one that blindsides people. If you're buying a condo on Hilton Head, in Bluffton, or anywhere in the Lowcountry resort market, the building itself has to qualify for financing — not just you.

Fannie Mae and Freddie Mac have strict requirements for condo projects. They look at owner-occupancy ratios, HOA reserve funding, single-entity ownership concentration, pending litigation, and commercial space percentages. If the condo association doesn't meet these guidelines, the project is considered "non-warrantable," and conventional financing may not be available.

This is especially common in older Hilton Head resort complexes. Some have too many units owned by a single investor. Others have HOAs that haven't funded their reserves properly — a growing concern after recent insurance cost increases across the coast. Your loan officer should be running a condo questionnaire before you fall in love with Unit 3B. I do this upfront with every condo buyer because discovering a warrantability issue after you're under contract is a fast way to lose your earnest money and your patience.

Rental Restrictions Matter More Than You Think

Planning to rent your place on VRBO when you're not using it? Your mortgage might have something to say about that. Second home loans require that the property is primarily for your personal use. Fannie Mae guidelines specifically state that the home cannot be subject to a rental pool or timeshare arrangement, and it can't be rented out on a full-time basis.

Short-term rentals during the weeks you're not there? Generally fine. But if the property is in a complex that requires participation in a rental management program, or if you're buying primarily as a short-term rental investment, you may need to finance it as an investment property instead — which means a higher down payment (typically 15–25%) and a higher rate. Beaufort County and Hilton Head also have their own short-term rental ordinances that affect what you can and can't do. Get clear on the local rules and the lending rules before you commit.

Insurance and Flood: The Hidden Budget Item

Homeowners insurance on the coast isn't what it used to be. Carriers have pulled out of coastal South Carolina markets, premiums have increased significantly in many areas, and flood insurance is now priced under FEMA's Risk Rating 2.0 system — which means your neighbor's flood premium might be very different from yours even on the same street.

For your cash-to-close planning, budget conservatively. On a $500,000 second home with 10% down, expect closing costs of 2–3% ($10,000–$15,000), prepaid insurance and flood premiums of $4,000–$8,000 depending on location and elevation, prorated property taxes, and reserves for the unexpected.